A common question that bankruptcy attorneys hear is whether having a steady paycheck disqualifies someone from filing. It doesn’t. Nor do bankruptcy filers give up all of their possessions.
Learn about employment status and bankruptcy, and get your other questions answered when you consult an experienced South Carolina bankruptcy attorney. Employment status alone has no bearing on bankruptcy eligibility. In fact, most people who file for bankruptcy are employed.
Common Misconceptions About Bankruptcy
Having a job does not disqualify you from filing for bankruptcy. What actually matters is how much you earn relative to your debts and your state’s median income, not whether you have a job at all.
The “no job, no bankruptcy” myth is a common misconception. Another is that filing means losing everything you own, when in reality, state and federal exemption laws are specifically designed to let filers keep necessary property, including a car and household goods. Others assume that bankruptcy is only for those who have mismanaged their money, although medical debt, job loss, and divorce are among the most common causes nationally. Still others think a bankruptcy filing follows a person forever when, in fact, a Chapter 7 bankruptcy remains on a person’s credit report for up to 10 years and a Chapter 13 drops off after seven years.
The Means Test Actually Determines Eligibility
Rather than employment status, Chapter 7 eligibility is governed by a formula called the “means test.” This determines who is eligible for Chapter 7 by comparing the filer’s average income over the prior six months to the median income for a household of the same size in their state. If a filer’s income falls below South Carolina’s median for their household size, they generally pass the test automatically regardless of the fact that they’re employed. If the filer’s income is above the median, a second calculation weighs allowable expenses against income to determine what, if anything, is left over to pay creditors. Filers who don’t pass the means test aren’t shut out of bankruptcy entirely; they’re typically directed toward Chapter 13, which restructures debt into a repayment plan rather than discharging it outright.
Your Job Is Legally Protected
Federal law does more than permit employed people to file for bankruptcy; it protects their employment status. Employers are prohibited from firing or otherwise discriminating against an employee solely because the person filed for bankruptcy. Government employers are also barred from denying, suspending, or revoking a professional license or public job based solely on bankruptcy. Congress adopted this protection after the U.S. Supreme Court’s ruling in Perez v. Campbell, which found that punishing people for debts already discharged in bankruptcy undermined the fresh start the law is meant to provide.
South Carolina’s Added Protections for Working Filers
South Carolina offers additional protection that many residents don’t realize exists: under the state’s Consumer Protection Code, most private creditors cannot garnish wages at all to collect ordinary consumer debt, such as credit card balances or medical bills. This protection applies regardless of where the debt was incurred, with narrow exceptions for government debts, child support or spousal support, and out-of-state garnishment orders that have been properly handled in a South Carolina court.
South Carolina also allows filers to protect certain property using state specific exemptions, since the state requires residents to use its own exemption list rather than the federal alternative. These typically include a homestead exemption for home equity, protection for one motor vehicle, household goods, tools of the trade, and a “wildcard” exemption that can apply to other property. Exact dollar amounts adjust periodically for inflation, so filers should confirm current figures.
Talk to an Attorney Before Assuming You Don’t Qualify
Whether Chapter 7 or Chapter 13 make more sense depends upon income, debt type, and what property needs protecting, not on whether someone is currently working. An experienced attorney from Lam Law Firm can review your income, explain the means test, and detail which South Carolina protections apply to your situation. Call for a consultation today.
